Keynote Address at the BPAM Bond Market Awards 2023 – Award Ceremony and Luncheon

Speaker: Muhammad Hakim, Deputy Director, Fixed Income, Securities Commission Malaysia
Location: Securities Commission Malaysia
Theme: BPAM Bond Market Awards 2023 – Award Ceremony and Luncheon
Delivered: 8 March 2023

Note: This is the speech as drafted and may differ from the delivered version

Introduction – Malaysia’s Bond and Sukuk market landscape

Asssalamualaikum Warahmatullahi Wabarakatuh dan selamat pagi.

Encik Meor Amri Meor Ayob, Ketua Pengawai Eksekutif dan Pengarah Eksekutif, BPAM

Dato-dato, tuan-tuan, puan-puan dan para hadirin sekalian.

1. I am honoured to be here among such distinguished group of attendees, all of whom have made significant contributions to the development of the Malaysian fixed income market.

2. We would like to extend our gratitude to Bond Pricing Agency Malaysia (BPAM) for not only hosting this important event but also providing the Securities Commission (SC) with the opportunity to deliver the keynote address at today’s event.

3. Allow me to start off by sharing with you some valuable insights into the Malaysian corporate bond and sukuk market.

4. The year 2022 will likely be remembered for the sharp increases in interest rates across the globe which continued to this year.

5. The US Federal Reserve (Fed) have already raised the Fed Funds Rate by 450bps to 4.75%. Other major central banks also followed the US Fed’s hawkish path. On the home front, Bank Negara Malaysia (BNM) hiked the overnight policy rate (OPR) by 100bps to 2.75%.

6. The increase in interest rates have had an impact on the bond market. The yield of the 10-year US Treasury went up to 3.88% and our 10-year Malaysian Government Securities (MGS) followed suit to 4.07%.

7. Despite the higher interest rates, total outstanding Malaysian bond and sukuk continued to grow year-on-year. In 2022, outstanding Malaysian bonds and sukuk amounted to 1.86 trillion ringgit compared to 1.74 trillion ringgit in the previous year.

8. End 2022, new supply of corporate bonds and sukuk grew to 153 billion ringgit from 114 billion ringgit in 2021, indicating continued corporate demand for debt financing. The good take-up rates also reflect investor confidence in the Malaysian bond market. We expect gross issuance of corporate bonds and sukuk to remain healthy.

9. The bonds and sukuk play a critical role in financing the economy, contributing significantly towards fulfilling our country’s development agenda.

10. I believe there are continuing opportunities in the Malaysian bond and sukuk market. Bonds and sukuk represent a good option for investors during periods of uncertainty. They provide diversification benefits, are relatively safer investments, and offer consistent income flows.

11. However, although Malaysia has a developed bond and sukuk market, there are still challenges that need to be addressed.

12. The market is dominated by institutional investors, which limits access for retail. This concentration of ownership and trading activities have resulted in less liquidity in the market and limited opportunities for retail investors to participate.

13. Furthermore, corporate bonds and sukuk in Malaysia were mostly issued by large issuers, which limits the range of yields offered in the market. We need to widen the credit spectrum beyond the triple-A (AAA) and double-A (AA) to enable smaller companies to tap the market.

14. To address the challenges, the SC has implemented several measures to encourage inclusivity of Malaysia’s corporate bond and sukuk market.

15. One of the measures is awareness programs to educate retail investors on the benefits of investing in corporate bonds and sukuk. The SC has been actively conducting various roadshows and seminars to provide retail investors with a better understanding of the market and opportunities available.

16. The SC also actively engage and initiate collaborations with various capital market intermediaries. Together, we have identified challenges and developed various solutions to raise participation of smaller issuers and retail investors.

17. On an annual basis, the SC would hold the “Industry Dialogue” as a venue for engagement with various capital market participants and industry associations. The attendees include investment banks, stockbroking and fund management companies. Through this event, the SC and the attendees would discuss about developments, potential opportunities, and emerging risks in the capital market.

18. The SC has also introduced several initiatives aimed at enhancing market liquidity and promoting the issuance of corporate bonds and sukuk. This includes the establishment of the Bond and Sukuk Information Exchange (BIX).

19. BIX was established in November 2017 with a strong focus in investor education. BIX provides a wealth of comprehensive and up-to-date information to facilitate increased transparency in both the primary and secondary markets and at the same time, increase investor awareness.

20. Malaysia’s corporate bond and sukuk market has come a long way in its development but there is still room for growth. While challenges exist, the SC will continue to put its efforts into implementing measures for further developing the market.

Push for Digitalisation

Ladies and gentlemen,

21. The COVID-19 pandemic has highlighted the pressing need for digitalisation in the capital market industry.

22. Unfortunately, efforts towards digitalisation of the Malaysian bond and sukuk market have been limited due to various factors including legacy infrastructure and the siloed value chain of stakeholders.

23. I believe that embracing digitalisation could bring significant benefits such as reducing barriers to entry and allowing faster turnaround time, as evidenced by examples from other jurisdictions.

24. The adoption of new technologies such as blockchain and the use of online platforms and digital channels can help to improve the efficiency of the issuance and settlement processes and enhance transparency.

25. Digitalisation also opens the bond and sukuk market to a wider range of investors. The setting up of online platforms and digital channels makes it easier to access the market.

26. It is worth noting that more and more countries are likely to explore digital bond issuances in the coming years, as blockchain technology gain wider acceptance.

27. To stay ahead of the curve, we must embrace digitalisation and determine how it can help us achieve better growth. A key outcome would be to shift away from current manual processes and move to a more efficient process that ease accessibility.

28. No doubt, digitalisation will transform the bond market, making it more efficient, transparent, and accessible.

Importance of Bond Pricing Agency

Ladies and gentlemen,

29. Bond Pricing Agency (BPA) plays an instrumental role in the bond market, complementing BIX's effort in providing bond and sukuk market information. BPA is the “bond” that unites issuers, credit rating agencies, investors, and other stakeholders by providing transparent, independent, and reliable data.

30. Where BIX focuses on the wider investing public especially retail, BPAM caters for the professional investors. Together they complement each other in the bond market ecosystem by providing information and tools on bonds and Sukuk issued in Malaysia.

31. BPAM’s BondStream terminal, for instance, is a treasure trove for data enthusiasts. Users can get credit ratings, new issuance information, yield curves, issuer financial information, trading activities, and corporate actions from the terminal.

32. The data enable market participants to be up to date with the who’s who and what’s what of the local bond and sukuk market scene.

33. Some of you might be surprised to know that the data available on BondStream go all the way back to year 2000 and cover not only Fixed Income but also Macroeconomics to a certain extent.

34. The SC appreciates the role played by BPAM in equipping bond and sukuk market players with the required information of the market.

35. BPAM’s indices such as the Refinitiv-BPAM Bond and Sukuk Index, ESG Bond Index, Unrated Bond Index and All Universe Bond Index, are the most representative benchmarks of the Malaysian bond and sukuk market.


Ladies and gentlemen,

36. In conclusion, the Malaysian bond and sukuk market have grown by leaps and bounds but there are still areas of improvement. We need to include smaller issuers and retail investors in the market. To stay relevant, we would also need to start embarking on digitalisation.

37. I would like to end my speech by taking the opportunity to congratulate the award winners. It gives me great pleasure to be here today to witness the event that showcases the growth of Malaysia’s bond and sukuk market.

Thank you.
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